GDP Data Lift Financial, Industrial ETFs

November 29, 2000
Loren Fleckenstein

The tradable financial funds rallied
Wednesday on new data showing economic slowing, improving the outlook for
interest rates. Exchange-traded funds focused on cyclical and basic industry
sectors also improved.Â

Before the open, revised government
figures showed gross domestic product grew at its slowest pace in four years in
the July-September quarter. The report reinforced views that the Federal
Reserve’s series of tightening campaigns has taken hold and cooled the
economy.Â

The Commerce Department reported that
GDP advanced at a yearly rate of 2.4% in the third quarter, less than half the
Q2 growth rate of 5.6%.

All charts in this commentary use a
logarithmic price scale as well as 50-day moving averages of price (in red) and
of volume (in blue). Some may have a 200-day moving average (in black) of price.
The blue relative strength between the price and volume charts tracks the
displayed security’s performance relative to the S&P 500.Â

For more chart analysis on the
financial sector, check out my Trading
The News commentary.

Exchange-traded funds combine traits
of stocks and mutual funds. Like mutual funds, an ETF represents diversified
ownership in a number of different stocks, reducing company-specific
risk. Like stocks, ETFs trade on exchanges, nearly all of them, in fact, trade on
the American Stock Exchange. They quote throughout the day, enabling
traders to take advantage of intraday price moves.

If you’re new to exchange-traded funds,
be sure to visit TradingMarkets’ Knowledge Center,
dedicated to explaining the basics of trading and active investing in ETFs and
mutual funds. Just click on the Funds tab
near the top of this page, then click on the Knowledge
Center tab.Â

You also will find lessons on trading
exchange-traded funds in the Stocks Education area of TradingMarkets.com. In
particular, check out my three-part series on trading ETFs, starting with href=”/.site/stocks/education/strategies/05262000-6129.cfm”>Moving
Average Crossovers. I also recommend newcomers read my tutorial, href=”/.site/stocks/education/strategies/06272000-6815.cfm”>Trading
HOLDRs: Unique Opportunity And Risk.

All stocks and exchange-traded funds
are risky. In any new trade, reduce your risk by limiting your position size and
setting a protective price stop where you will sell your new buy or cover your
short in case the market turns against you. For an introduction to combining
price stops with position sizing, see my lesson,
Risky Business. For further treatment of these and related topics,
you’ll find extensive lessons in the Money
Management area of TradingMarkets’ Stocks Education section.

GDP Data Lift Financial, Industrial ETFs

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